The Philippines reported a balance of payments (BOP) surplus for the seventh month in a row in August, mainly due to the government’s foreign borrowings for its pandemic response.

Data from the Bangko Sentral ng Pilipinas (BSP) showed the $657 million surplus booked in August was 33% up from the surplus of $493 million logged a year ago, and significantly higher than the  $8 million surfeit in July. This is also the highest surplus since May’s $2.431 billion. 

“The BoP surplus in August reflected mainly the inflows from the BSP’s foreign exchange operations and income from its investments abroad,” the central bank said.

The BoP shows the country’s economic transactions with the rest of the world within a given period. 

Year-to-date, the BoP posted a surplus of $4.774 billion, 13.6% lower than the $5.529 billion surfeit in the January to August 2019 period. 

“The current BOP surplus was supported mainly by foreign borrowings by the National Government along with lower net deficit in merchandise trade.1 These outcomes offset fully the impact of higher net outflows of foreign portfolio investments, and lower net inflows from foreign direct investments, trade in services, and personal remittances,” the central bank said. 

Government borrowings from January to July reached P1.857 billion, surging by 121% from the P839.7 seen in the same period of 2019, data from the Bureau of the Treasury showed. In July alone, borrowings reached P135 billion, of which P67.7 billion came from external lenders.

By end-2020, the BSP expects the BoP position at a surplus of $600 million which is equivalent to 0.2% of the country’s gross domestic product.

The latest BoP position also reflects a final record high gross international reserves of $98.95 billion as of end-August, higher by 15% against the $86.031 billion a year ago and by 0.35% from the $98.6 billion seen as of end-July.

“This is equivalent to 9.8 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 9 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity,” the BSP said.

The sustained slowdown in imports will likely contribute to a possible surplus in the BOP in the coming months, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

In July, trade deficit stood at $1.827 billion, lower than the $3.641-billion gap in the same month last year, data from the Philippine Statistics Authority showed. In the first seven months of the year, trade balance stood at a deficit of $12.501 billion, slimmer than the $24.066-billion trade gap in 2019’s comparable seven months. 

The import bill declined by 28.1% year on year to $46.636 billion in the January to July 2020 period.

“Sustained recovery in OFW remittances, exports, as well as in business process outsourcing revenues would also help sustain BoP surpluses in the coming months,” Mr. Ricafort added.

Cash remittances have been recovering since June after the slump seen from March to May due to the pandemic crisis. In July, cash remittances rose 7.8% to $2.783 billion from $2.581 billion. However, inflows year-to-date were still down by 2.4% to $16.802 billion from $17.219 billion.

“The next months until the end of the year, I expect more of the same for the BOP until the veil of the pandemic is finally lifted,”  UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a text message. — Luz Wendy T. Noble 

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